Knowing Auto Features in DC Plans Doesnt Mean Theyre Used

Ninety-four percent of large employers with defined-contribution plans are familiar with 401(k) automatic enrollment and 78 percent are familiar with automatic escalation, but only 42 percent use auto enrollment and 28 percent use auto escalation.

Of those using automatic enrollment, 58 percent enrolled only new hires when first adopted, and 35 percent automatically enrolled all nonparticipating employees upon adoption.

“Employers were most likely to identify the following as ‘major reasons’ that companies offer automatic features: it helps employees save more for retirement (74 percent), it is easier to pass nondiscrimination testing (49 percent), and it demonstrates that we are a socially responsible company (35 percent),” according to an AARP news release detailing the survey’s findings.

Of the employers without automatic enrollment, 30 percent cited concerns that employees would not like it, 20 percent cited costs, 14 percent cited contentment with the status quo, and 10 percent cited a lack of information about automatic enrollment.

Sixty-six percent of employers without automatic escalation said they believe employees would not like it, 52 percent said employees would find it confusing, and 35 percent cited a concern about employer matching costs.

AARP commissioned Woelfel Research to conduct the survey of 806 large employers with 401(k) plans between December 15 and February 24.

S. Kathi Brown, senior research advisor at AARP Research & Strategic Analysis and author of the report, could not be reached for comment.